Increase My Credit Card Limit
Do you know increasing credit card limits is more than just expanding purchasing power?
In fact, it lowers your individual and overall credit card utilization ratios which results in your FICO® scores getting a boost. On top of that, with lower credit utilization and larger credit limit availability, you will appear much more favorably to banks when applying for additional credit.
For example, when it comes to applying for our stated income business credit lines the size of your personal credit limits have an impact on how much you pre-qualify for. As a general rule, the highest credit limit you have on a personal card means you may qualify for 4 to 5 times that amount in business credit lines.
For example, let’s say you have a personal credit card with Barclay’s and your $10k card limit was recently increased to $20k. As a result, this can potentially pre-qualify you for $80-$100k in unsecured business credit lines for your startup or existing business.
The reason is the higher the credit limits you have, the more creditworthy you appear to banks and lenders. Of course, other factors such as utilization, length of payment history, age of accounts and types of credit play a role as well.
So how do you increase your credit card limits?
Method 1: Automatic account review
Many card issuers will increase your credit limits automatically if your account shows that it warrants a higher credit limit. Card issuers conduct these automatic account reviews usually every 6 or 12 months. Keep in mind the seven factors listed below provide insight into whether your account may get an increase or not.
Note: When your card issuer gives you a credit limit increase because of an account review you will not get a hard inquiry on your credit reports. Automatic account reviews are conducted internally and most likely trigger a soft pull.
Method 2: Request a credit limit increase
You can either call the card issuer or in many cases you can request an increase online via your account login. Keep in mind when you request a credit limit increase you trigger a manual account review of your account with the card issuer. This will also generate a hard inquiry to your credit so be aware that each time you manually request for a credit limit increase you are in fact incurring a hard inquiry.
Now if your request for an increase is denied, it’s important to find out why. Remember, a credit card issuer does not have to grant your request for an increase.
But before you decide to make that request, here are 7 key factors that impact a credit limit increase:
- Credit Card Account Age – The length of time your account has been established with a card issuer plays an important role when you’re being considered for a credit limit increase. Be sure to allow a 6-month or 12-month block of time from account opening prior to submitting a request. Remember, before you initiate a manual request most card issuers conduct an automatic account review every six or twelve months to determine whether your account should get a credit limit increase.
- Payment History – Are you paying on or ahead of the due date with all creditors? If you missed a payment or made a late payment on any account in the past 12 months then you most likely will be denied a credit limit increase. It’s key to maintain a history of paying on time with all creditors to improve the chances of getting a credit limit increase.
- Payment Amount – If you’re carrying a balance on your account but you’re only paying the minimum amount due each month it can impact whether you qualify for an increase or not. Both the payment history and the amount of your payments each month helps credit card issuers determine if an account qualifies for a credit limit increase. Pay much more than the minimum monthly payment for at least three months prior to requesting a credit limit increase. Personally, I recommend that you pay much more than the minimum amount due all the time.
- Payment Activity – Do you make more than one payment per month on your card? Did you know making multiple payments on a card account each month increases the payment activity and the amount you pay with that card issuer. Although this won’t increase your credit score it will show to the card issuer that you are likely to pay more than the minimum amount due and ahead of the due date. Best of all it makes it easier to keep your credit utilization low which is exactly where it needs to be.
- Account Activity – Using your credit card on a consistent basis plays a key role during a review for a credit limit increase. According to Capital One, customers who are most often approved for credit limit increases tend to use more of their credit line on a consistent basis. Whether it’s spending and paying off the balance in full each month or keeping a balance and paying more than the minimum payment; credit usage is a determining factor.
- Credit Utilization – If during an account review you currently carry high balances on all your revolving credit card accounts then you are more than likely to be denied an increase. Keep your credit card utilization ratios below 50% with 30% or below being ideal prior to requesting an increase.
- Credit Reports – Your credit report will play a role in the approval or denial of a credit limit increase. In general, card issuers will not increase a card’s credit limit if there are recent late payments, high credit utilization on revolving accounts or other negative entries reporting on your credit reports.
Should you request a credit limit increase?
Take these seven factors into consideration first. Secondly, if you want to lower your credit utilization or increase your buying power, you may want to ask your card issuer for an increase but only do so if you don’t plan to apply for credit in the near future since it will trigger a hard inquiry to your credit.
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About the author
Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, Business.com, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in ‘Fox Small Business’, ‘American Express Small Business’, ‘Business Week’, ‘The Washington Post’, ‘The New York Times’, ‘The San Francisco Tribune’, ‘Alltop’, and ‘Entrepreneur Connect’.